What is a bear market and are we in one?

In some cultures, bears symbolize courage, strength and wisdom. Investors have a different vision. For investors, bears mean the prices of the actions and values ​​of the anemic portfolio.

A bear market occurs when shares prices, according to a reference index, fall by 20% or more. The S&P 500, the industrial average of Dow Jones and the Nasdaq Composite index are popular reference points that represent different segments of the North -American Stock Exchange.

The three indices were immersed in the wake of the new fare policies announced on April 2 by President Trump. After the prices of actions diminished, experts began to warn a new bear market in the United States, we explore what this notice means, whether we are in a bear market or in what actions you can do to protect your wealth.

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A bear market is a prolonged reduction in 20% or more than a more recent shares. While some investors may see Bear’s markets as the enemy of long -term returns, the weakest prices for the shares are normal and necessary. Without bear markets, the risk of investment would be limited. And without risk, investors would pay more for shares, limiting possible returns.

Frequency, duration and severity of the market

The following table describes the key characteristics of the bear market, including the frequency they spend, how long they last, and the severity they are, according to Goldman Sachs Research.

Bear markets are temporary diversions of bull markets or periods in which actions prices increase. A gain of 20% of a recent low point is a threshold accepted in the bull market. Bull markets last longer than bear markets and more than bear market losses. This is evident in the long -term performance of the securities market. Over time, shares prices grow an average of 6.5% to 7% per annum, net of inflation, despite regular bear markets.

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A correction of the market is a decrease in the prices of the shares of less than 20% compared to a recent maximum. Although there is no firm threshold, many investors begin to talk about corrections when the prices of shares have dropped by 10%. As with bear markets, these pricing movements usually measure through changes in a significant reference index such as the S&P 500.

The S&P 500 reached a maximum of 6,147.43 on February 19, 2025. A decrease of 20% from this point would be 4,917.88. The index fell to 4,910.42 on April 8. On April 9, President Trump paused the majority of new rates and actions prices increased.

In this case, the S&P 500 dropped by 20% and bouncing quickly. This is not a bear market. However, the level of closing of the index of about 5,375 of April 23 remains more than 10% below February, which complies with the market correction threshold.

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Market corrections and bear markets occur when more investors are sold and buy. This tendency is often based on uncertainty about future business conditions. The change of fare rules and a growing conflict with China are two factors that sent investors seeking safer investments.

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Sell ​​shares before a bear market or correction can be a good strategy. If you sell while the prices are still high, you will get the highest value. You can then re -implement the funds temporarily in safer assets.

The challenge is that most investors cannot accurately predict the schedule of the securities market cycles. A bewildered trade can lead to unnecessary loss or lost opportunities.

You can avoid MISTIMED operations following Bear’s simplest investment strategy, which involves making changes to your plan. Contribute to your 401 (K) and Corredoria account, keep in your actions and backgrounds and wait for the bear market to end.

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Maintain status quo in your investment activities during a bear market provides these advantages:

1. Your dollar buys more when stock prices go down. You can add your participation count faster to the bear markets, which position you very well to earn in the future.

2. Avoid realizing -losses at low temporary prices. A stock can fall from $ 100 to $ 75 and then rapidly increase to $ 110. You don’t want to sell to $ 75.

3. He remains invested and is able to benefit from recovery profits. The earnings near the end of a bear market can be extreme. Maintaining -invested is the only way to participate.

4. You don’t have to make decisions. Bear markets are stressful. You may be eager to do something, anything, to suppose your losses. Allowing you to do anything cannot relieve this concern.

Bear markets occur and 20% or more decrease in shares prices have a chilling effect on your net value. The good news is that these cycles are temporary. And this gives you the option of ignoring the headlines, staying calm and continuing to invest to move towards your long-term financial goals.

Tim Manni edited this article.